We are probably talking about different things.
The topic is about in-game scripting brought in form of an addon, the author brought examples like E2 and Starfall, which are exactly that.
From what I can imagine, S&Box C# API won’t be rich enough in low-level APIs to write a proper runtime for a language (be it C# or something else) for it to run efficiently using optimizations like jit, which allows for near-native experience.
Of course Facepunch can specifically come up with a solution that allows to compile, send and run pieces of C# code while in game, but I think this topic is more about what any one of us, as a S&Box addon developer, could design to run other languages (including but not limited to C#) using S&Box C# API to interact with the engine.
And to me it looks like the only solution to this would be C# runtime written in C# (and probably none of existing ones will work for S&Box because many of the needed low-level features won’t be whitelisted in S&Box C# API for security reasons), so it’d be a rather limited subset of C# which runs slower which to me kinda kills the point of using C# as such a scripting language in the first place.
Also, you edited your post so many times trying to make it clear what is a virtual machine and what is virtualization and so on, don’t try so hard, I know what is what, I didn’t mean system virtualization when I said virtualization, I used that term to describe having VMs running C# bytecode inside one another, that has nothing to do with VMWare or VirtualBox.